Social Justice Solutions | Staff Writer

What Are Our National Goals?

In a recent New York Times opinion piece, Nicholas Kristof asks, Why Let the Rich Hoard All the Toys? His simple analogy, looking at a kindergarten classroom of 100 children where 1 boy hoards the majority of toys, several kids have a few toys, and the other 90 have none, puts a certain perspective on the unequal distribution of wealth currently known in our society. He states, “This inequality is a central challenge for the United States today and should be getting far more attention in this presidential campaign.”

The article cites the following data from Nobel laureate, Joseph Stiglitz’s new book, “The Price of Inequality.”

“In 2010, 93 percent of the gain in national income went to the top 1 percent. America’s Gini coefficient, the classic measure of inequality, set a modern record last month,” the highest since the Great Depression.

Striking also, as Mr. Kristof mentions, is the data from a study published in 2011, Building a Better America One Wealth Quintile at a Time, by Michael I. Norton and Dan Ariely of Harvard Business School and Duke University, respectively. From a nationally representative online sample randomly drawn from a panel of more than 1 million Americans, survey data was taken from a group of 5,522 respondents, 51% female and 49% male, with a mean age of 44 and represented respondents from 47 states. After verifying a standard working definition of wealth, they “asked Americans to construct distributions of wealth they deem just.” The results were that the respondents, “dramatically underestimated the current level of wealth inequality” and “constructed ideal wealth distributions that were far more equitable” than currently exists, and this held across “all demographic groups, even those not usually associated with wealth redistribution such as Republicans and the wealthy.”

The respondents “drastically underestimate the current level of wealth inequality,” and the researchers state that “just as people have erroneous beliefs about the actual level of wealth inequality, they may also hold overly optimistic beliefs about opportunities for social mobility in the United States,” may disagree about the causes of inequality, and “exhibit a general disconnect between their attitudes toward economic inequality and their self-interest and public policy preferences.”

All things being unequal and optimistic beliefs regarding upward mobility aside, it’s hard to ignore Venkat Venkatasubramanian’s 2009 article in Entropy, What is Fair Pay for Executives? An Information Theoretic Analysis of Wage Distributions. The chemical engineering professor at Purdue determined, “the ratio of CEO pay to the lowest employee salary has gone up from about 40-to-1 in the 1970s to as high as 344-to-1 in recent years in the United States averaging about 129-1. However, the ratio has remained around 20-to-1 in Europe and 11-to-1 in Japan, according to available data.” He goes on to say, “the executive pay excesses appear to be a recent phenomenon in the U.S., and “appears to be another valuation bubble, “the CEO valuation bubble,” much like the ones we have witnessed in stocks, real estate, commodities, etc.” The difference between the housing bubble, commodities, and stocks is that those industries are regulated to ensure there are no “unfair practices such as monopolies, collusion and insider trading.” How is this bubble going to pop? And at whose expense and how will it be corrected?

I am not an economist, but it seems clear that blaming the poor for their poverty, while ignoring societal conditions that exist to ensure a poor, working class, conditions which are becoming more pronounced, more entrenched, and touching greater amounts of the working population, society would be better served investigating the root causes and not getting caught up in party rhetoric. The changes in the tax code and regulatory system since the late 1970s have ensured the growth of the big business and maximizing profits to big business owners at the expenses of workers, yet little has been done to support new industry and new growth.

One comment to Nicholas Kristof’s article, from Doug of Minneapolis says it clearly. “Among other things, stripping out the progressive tax system of the 50’s and 60’s has entirely changed the incentive of the boardroom and the uppermost management tier in American business since those decades. ..Long term growth was the goal.”

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3 Comments

Stealing money from folks that have earned it and giving it to the government won’t make any one better off. The rich haven’t been handed their toys- they EARNED them,or their parents earned it and passed it down. Far more effective than simply encouraging wealthy to put money in foreign investements to avoid taxation– as that is what happens- increase skill training and education so those that are less well off have more to offer. And some folks will always be better off than others- unless we institute a Handicapper General (Philip K.Dick, good writer!), that is simple human biology. And we need those with more basic skills- without low-paid workers, we would not be able to afford much at all. Pay McD’s worker 20 bucks an hour, your cheeseburger will cost 10 or 15 bucks, 20 with fries.

Agreed Rachel. Perhaps if the gross disparity in growth of CEO salaries from 40-1 to 129-1 on average springing up over a relatively short amount of time and way out of keeping with other industrial nation’s is discussed more routinely, the mere mention of it won’t garner images of Robin hood stealing from the rich to pay for the poor. Interestingly, the governmental policies that have shifted to support such a skewed growth pattern hardly ever get a nod.